Oil & Gas
INTERNATIONAL Oil Companies (IOCs) have been barred by the Central Bank of Nigeria (CBN) from repatriating 100 per cent of their foreign exchange earnings to their parent companies at once.
With the restriction, the IOCs can only pull out 50 per cent of the proceeds from their banks in the first instance and then the other half after 90 days.
According to the directive, their bankers will first “obtain prior approval from the CBN for repatriation and satisfy specific documentation requirements,” such as completion of relevant Forex forms, evidence of the source of foreign exchange inflows and provide statements of expenditure by the IOCs in the immediate past period related to the “cash pooling” transaction.
The CBN also directed that payments of Personal and Basic Travel Allowances by banks should only be done via electronic channels and no longer by cash.
The measures, according to the apex bank’s Director of Trade and Exchange Department, Hassan Mahmud, are aimed at shoring up dollar liquidity in the Nigerian FX markets.
In one of the three circulars issued by Mahmud on measures to make the foreign exchange market liquid, the CBN said it observed that proceeds of crude oil exports by the IOCs were transferred offshore to fund their parent accounts in a phenomenon described as “cash pooling.”
“This has an impact on liquidity in the domestic foreign exchange market,” the apex bank stated.
“In line with the ongoing reforms in the foreign exchange market, it has become necessary to take measures to address this trend, consequently, the CBN hereby directs as follows:
*Banks are allowed to pool cash on behalf of IOCs, subject to a maximum of 50 per cent of the repatriated export proceeds in the first instance;
*The balance may be repatriated after 90 days from the date of inflow of export proceeds.”
The second circular titled, ‘Allowable Channels For Payout Of Personal Travel Allowance (PTA) And Business Travel Allowance (BTA),” made references to “Memorandum 8 of the Foreign Exchange manual and a circular with reference FMD/DIR/CIR/GEN/08/003 dated February 20, 2017 “which stipulate the eligibility criteria for accessing Personal and Business Travel allowances (PTA/BTA).”
The circular partly reads: “In line with the bank’s commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices, All Authorized Dealer Banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards.”
The CBN said in the third circular that it has implemented the Price Verification System (PVS) to curb the over-invoicing of imports and under-invoicing of exports.
It stated in the circular, that “declared prices of import items exceeding 2.5 per cent of the global average prices of the referenced item will now be scrutinised.
The apex bank also said it has revised the permissible limit of price deviation for exports and imports to -15 per cent and +15 per cent of the global average prices, respectively.
The PVS, Hassan Mahmud said, “is not intended to determine actual prices for tariffs or duty charged by the government, but rather to limit the outflow of foreign exchange by addressing over-invoicing and other price manipulation activities.”
The CBN said it remains committed to promoting transparency in the Nigerian Foreign Exchange Market and will continue to develop policies to stabilise and further deepen the market.
It advised all banks to comply with these circular and inform their customers accordingly.
THE NATIONS
15th February, 2024.
C.E.
Tags: IOCs
